Krispy Kreme Falls as HSBC Downgrades, Cuts Target to $14

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Krispy Kreme Falls as HSBC Downgrades, Cuts Target to $14

By Dhirendra Tripathi – Krispy Kreme stock (NASDAQ: DNUT ) fell by 3.5% Thursday as HSBC downgraded the stock to hold from buy with a $14 target.

The analysts earlier had a $25 target for the stock. Krispy Kreme traded below the revised target in today’s session.

The donut chain is moving to a company-owned model compared to the industry norms of operating outlets under a franchise. According to HSBC analysts, this is weighing heavily on its balance sheet and hurting returns to equity holders.

According to reports, the analysts’ reservations also have roots in the company’s IPO. The company had its second market birth on July 1 after going private in 2016.

More than a third of the shares were distributed to minority shareholders in the IPO, larger than the float. That equity had a lock-in which expires year-end. As per reports, the HSBC analysts believe this continues to be an overhang on the stock.

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